Editors’ note: This article was the last that Rick Cohen wrote for the Nonprofit Quarterly, and it was one of his most ambitious in its weaving of political, philanthropic, and community intentions, partnerships, and realities. Rick died suddenly just as we were beginning our edit, and we were left with the sad task of doing the best we could without his input—any errors of fact should be put down to the editors, and life’s interruptions of this process. That said, this case study of an historic interplay between the sectors to try to save a city, and the intended and unintended consequences that resulted, is sure to become a classic. It can be found in the Nonprofit Quarterly’s winter 2015 edition, “When the Show Must Go On: Nonprofits & Adversity.” There will be a memorial held for Rick Cohen on January 12, 2016.

Donna Murray-Brown, CEO of the Michigan Nonprofit Association, lives the duality experienced by many Detroiters faced with tough decisions to make for the city’s economic recovery. On the one hand, she is a nonprofit executive, a public policy advocate, and—to some extent—a player at the table in the discussions of what Detroit needs to do to recover from the brink of economic collapse and chart a path toward citywide recovery; on the other hand, she is the daughter of a senior Detroiter whose retirement pension was reduced as one of the components of the partly foundation-funded “grand bargain” that became the blueprint for Detroit’s escape from a prolonged and debilitating bankruptcy. Her father’s perception is that the grand bargain and other elements of Detroit’s rescue involve things “being done to him rather than for him.”1

In a way, that is the real challenge of Detroit’s recovery: the contrast between bold, innovative ideas that envision a very different Detroit from the prosperous manufacturing metropolis of half a century ago, and the conditions of longtime residents of the Motor City—a population that is in high majority black, mostly lower income, in many cases unemployed or underemployed, and at risk in the tens of thousands of displacement due to tax foreclosures, mortgage foreclosures, unpaid water bills, and—surprisingly for a city that has huge tracts of vacant, dilapidated buildings—pockets of upscale gentrification. How does Detroit come back from the verge of economic collapse and municipal bankruptcy to devise and implement a future for long-established Detroiters and new residents?

A History of Unrealized Plans and Hopes

In the wake of Detroit’s declaration of municipal bankruptcy and complex plan involving state, municipal, and philanthropic resources to escape that bankruptcy, the city still looks and feels to many Detroit residents like it is staggering along a difficult trajectory toward its goal of sustainable revitalization.

Detroit is the poorest large city in the United States. It has significant unemployment—officially, nearly 13 percent in August 2015, and an unofficial rate that may well be double or triple that, if we take into account people having given up looking for jobs or whose unemployment benefits have expired. It also has significant underemployment, due to the automotive industry’s having shrunk and largely decamped—leaving vast tracts of vacant land and buildings across the 139-square-mile Detroit footprint as an additional result.2 Plans to bring Detroit back from the edge of collapse and despair aren’t new to Detroiters; as the city has slid in population and economic significance over the past few decades, reams of renewal initiatives emerged from public-sector, private-sector, and philanthropic sources, with the aim of jump-starting the community’s flagging socioeconomic dynamic and reversing what seemed to many an inexorable decline.

One such initiative, the waterfront Renaissance Center, aimed to capture residents and business headquarters that were leaving for the suburbs or beyond. During the administration of Mayor Coleman A. Young (1974–94), the Renaissance Center was completed—along with other major projects, including the Detroit People Mover, an elevated train meant to transport people through the Downtown area, and the redevelopment of the Joe Louis Arena, home of the Detroit Red Wings National Hockey League team. (The arena is already outmoded and about to be replaced.) Mayor Dennis W. Archer (1994–2002) launched a variety of community-oriented initiatives (though his major economic achievement for the city may have been his success in making casinos a linchpin of Detroit’s Downtown activity) and, like his predecessor, promoted major sports stadium projects, realized after his term in office (Ford Field, where the National Football League Detroit Lions play, and Comerica Park, home to Major League Baseball’s Detroit Tigers).

Nonetheless, Detroit’s slide continued largely unabated, despite the new sports venues and casinos. And, with the support of business, philanthropy, and the federal government, Detroit hosted other initiatives aimed at neighborhood and citywide renewal. In the early 1990s, Detroit was one of six “urban empowerment zones” meant to benefit from a $100 million federal grant infusion plus a variety of federal tax incentives, which the city devoted in significant amount to human services needs and issues—notably, community policing and the integration of criminal justice programs and functions.3 Several years after the “urban empowerment zone” designation, an analysis called Detroit’s use of the program “spectacularly unsuccessful” and—notwithstanding a few entities that took advantage of tax incentives and some of the grant funding—having made, in the words of a Detroit Free Press article, “zero difference to most Detroiters.”4 This was followed by former mayor Dennis Archer’s Community Reinvestment Strategy, a neighborhood planning process focused on ten cluster areas. Although involving extensive citizen participation through meetings and focus groups, the results were seen as “overly ambitious wish lists of every community in the city,” “not grounded in fiscal reality,” and “presented in a ‘planning vacuum’ with no overall policy framework for physical development outside the downtown area.”5

Over the years, the themes undermining Detroit’s efforts to change course have been consistent: weak political leadership; an inability to establish priorities in a large city with multiple neighborhoods in physical and economic tatters; and success in helping some Downtown interests and major redevelopment projects, but with little corollary benefit to neighborhoods and the longtime Detroiters who live there.

Why should Detroiters think the city’s current post-bankruptcy status will reverse the long slide toward economic obligation? The challenge is not whether or not the grand bargain proves to be a successful lever that vaults the city government past bankruptcy but rather whether or not the actions of state and local government, nonprofits, and foundations move Detroit into a trajectory of sustainable recovery.

Reflections on a Grand Bargain: Challenges of Democracy

Detroit’s new path was crafted as much in federal bankruptcy court as in the offices of local government, and overseen by an emergency financial manager appointed by the governor—amid revitalization plans that emerged from foundation-sponsored collaborations and public-private partnerships. This path may have stemmed from the 2014 deal between private foundations, the state government, and the Detroit Institute of Arts (DIA) that became known as the “grand bargain”; but the true bargain wasn’t the one struck by the three dealmakers. Among all the potential creditors that the bankrupt municipal government had to fend off, the most important in a moral and perhaps legal sense were the retirees who had worked for the police department, the fire department, and other city agencies, paying into pensions they thought were going to support them when they retired. With an infusion of approximately $366 million from foundations into the bankruptcy settlement (through the artifice of saving the collection of the municipally owned Detroit Institute of Arts from public auction), what resulted was a “haircut” for retirees—a minor reduction of 4.5 percent in the pensions of most general government retirees, the elimination of cost-of-living increases, and a cutback in postretirement health benefits.6 Facing the prospect of no resolution to the bankruptcy and unforeseeable litigation to exact money out of a bankrupt city, two-thirds of retirees voted in favor of the deal—essentially waiving their constitutional rights, as Michigan Attorney General Bill Schuette acknowledged.7 Through this mechanism, retirees lost much less than other creditors—but, in the words of Fortune magazine, “the average pensions in Detroit are so modest that any cuts will surely be painful.”8 (The modern-day equivalent to President Reagan’s mythical “welfare queens” is today’s no-less-mythical “retired cops with $100,000 pensions.”9 Like the welfare queen driving a Cadillac, perhaps there exists the occasional retiree basking in a six-figure annual pension; but in Detroit, general retirees receive average annual pensions of $19,000—those who receive social security—and police and fire retirees receive annual pensions of $32,000—those who do not.10)

The grand bargain has been heralded inside and outside of philanthropy as the linchpin of Detroit’s ability to move beyond the stalemate of a prolonged bankruptcy—an unprecedented philanthropic collaboration, albeit crafted by the federal bankruptcy judge, Gerald Rosen, who sketched the mechanisms for inserting foundation money into the deal in a doodle on the back of a legal pad: a sketch with arrows linking the words “art,” “pensions,” “state,” “foundations,” “private sources,” “timeline,” and “how much.”11 But there has been a concurrent background debate within philanthropy about the wisdom of foundations pledging nearly $400 million dollars to bail the Detroit city government—and, implicitly, the state government, as well—out of obligations taken on by the government. None of the previous or contemporaneous municipal bankruptcies encountered elsewhere in the nation (such as Central Falls, Rhode Island; San Bernardino, California; Stockton, California; Jefferson County, Alabama; and Harrisburg, Pennsylvania) had led to anything like the grand bargain—though, to be fair, none was anywhere near the magnitude of Detroit’s Chapter 9 filing.

Source: Letter from Kevyn D. Orr to Governor Richard D. Snyder and Treasurer Andrew Dillon recommending a Chapter 9 bankruptcy filing by the City of Detroit, July 16, 2013.
Source: Letter from Kevyn D. Orr to Governor Richard D. Snyder and Treasurer Andrew Dillon recommending a Chapter 9 bankruptcy filing by the City of Detroit, July 16, 2013.

Critics (who declined to be quoted on the record—partly because of a concern about harming their institutions’ relationships with the major foundations that had committed to the grand bargain) focused significantly on the process of how the deal came together, and cited the backroom dynamic of the negotiations—noting that, as one put it, there was a “lack of democracy in the whole process” and not much evidence of the city’s own elected officials being substantive participants in the game. One critic acknowledged, however, that while the grand bargain may have been less than democratic, his own family (which included retired Detroit city employees) was already suffering from a dysfunctional city government that had caused the city to deteriorate into incapacity over the years (with the corrupt 2002–08 administration of Kwame M. Kilpatrick being the final nail in the coffin), and feeling largely disenfranchised.

Rather than looking at Detroit as a sui generis implosion, some observers noted that Detroit had been allowed to languish—or was perhaps pushed toward an inexorable decline—by actions of the southeast Michigan region, whose residents worked in Detroit but went home to wealthy suburbs at the end of the day, and by the decisions of the state government, which had starved Detroit of needed state government resources. Surprisingly, perhaps as a reflection of how government and society have changed over the decades, there was little or no blaming of the federal government under the Obama administration, whose posture toward Detroit was not much different from President Gerald Ford’s apocryphal “drop dead” denial of federal assistance to New York City in 1975.12

Nevertheless, critics within philanthropy also acknowledged the fear that Detroit would become the philanthropic equivalent of Flint, Michigan. Long the focus of the Charles Stewart Mott Foundation, Flint’s problems have been endemic, including unemployment, poverty, and large-scale breakdown of municipal services. (Ironically, with respect to the latter, the problem of a contaminated municipal water system led Flint recently to connect to the decrepit and controversial Detroit water system.13) Detroit hadn’t been working for years—streetlights off, police and fire responses slow to nonexistent, garbage pickup intermittent, public facilities visibly and rapidly deteriorating. Even for critics and for foundations that came late to the deal, the grand bargain is recognized as a necessary if synoptic action. Church leaders in Detroit neighborhoods, one source said, told their parishioners that the grand bargain might or might not have been a “good deal,” but it was necessary to break the city’s governance coma and financial slide.14

In 2013, in a presentation at the Bradley Center for Philanthropy & Civic Renewal at the Hudson Institute, Tonya Allen, the president and CEO of the Skillman Foundation, declared that “philanthropy has had to step up to fill this void of city leadership and a void of leadership by the civic class.”15 At that time, perhaps as the grand bargain was first taking shape, Allen advised her fellow philanthropists that “we should not allow ourselves to have undue influence on processes that need to be and ought to be democratically controlled…. [In Detroit] we have stepped in entirely too much. We have not only funded it for the public good, then we’ve advocated where we want it to go and then we also advocate that those decisions go to institutions that we primarily fund. I think that is a fundamental flaw.”16

Two years later, the Skillman Foundation became one of the funders engaged in the grand bargain. Allen explained that unlike the trajectory of disappointment and failure that had been the norm in Detroit up to the bankruptcy, the grand bargain, regardless of its having been conjured outside of democratic processes, “gave everyone a collective memory of doing something hard and difficult and being successful.” At the point of the bankruptcy, Detroit had become a “broken municipality,” meaning that its governing apparatus was incapable of functioning for just about anyone. For all the efforts of foundations and nonprofits up to that point, without having a chance for the municipality to function those efforts would be for naught. “If you don’t have a working municipality, then none of the investments you make will be sustainable or in fertile ground,” she said.17

In addition, however, the Skillman Foundation emphasized the importance of the retirees. In her Hudson Institute presentation, Allen cited the modest pension levels, and that 46 percent of the retirees still live in Detroit.18 Allen appeared to find off-putting the notion that the grand bargain was focused on saving the Detroit Institute of Arts rather than protecting the pensions of retired government workers. Too many seem to talk about the museum as “the most important possession in our municipality,” Allen explained, whereas for the Skillman Foundation “it was really our people. It took us a while to get comfortable with the values of the grand bargain.” It seems, though, that the process resulted in the key institutions engaged in the grand bargain coming to see the importance of trying to keep the Detroit pensions as whole as possible.

To their credit, the foundations in Detroit’s grand bargain came to the bankruptcy issues with an “unprecedented urgency and seriousness,” as Silicon Valley Community Foundation CEO Emmett Carson described it, looking at the Detroit dynamic through an outsider’s lens.19 The Detroit issues were not typical, very complicated, and gave foundations such as The Kresge Foundation and the Ford Foundation—the two largest philanthropic contributors to the deal—little or no past experience to draw on for guidance. Carson sees the grand bargain as a great example of “being innovative,” “moving quickly,” and “serving a need”—all characteristics to be celebrated. Will the initial success of the grand bargain—in that it accelerated Detroit’s leap out of the stasis of bankruptcy—be a standard fixture in upcoming and future governmental fiscal crises, such as the ongoing troubles in Puerto Rico or the massive pension debt facing the city of Chicago?

Reviving Bankrupt Schools

As one bankruptcy took Detroit through its paces, another unfolded. A fiscal manager was in charge of trying to get the Detroit Public Schools (DPS) out of free fall, but without the option of filing a Chapter 9 bankruptcy petition to renegotiate or even wipe out significant portions of the school system’s debt. As of 2014, the DPS’s own unfunded pension liabilities had reached $1.2 billion.20 The system’s operating deficit as of the beginning of calendar year 2014 was close to $170 million.21

No one among Detroit’s philanthropic and community leadership minimizes the importance of fixing the schools—indeed, it is viewed as a crucial if not top priority for Detroit’s revival. It isn’t as if other cities have found the magic elixir for education that has somehow eluded Detroit, but Detroit’s challenges inextricably link education to poverty.

One observer who was very close to DPS challenges suggested that part of the problem—and the expense—of public education in Detroit was that the schools were compelled to do more than educate.22 Children would come to school in need of such basics as food, and even dental care—which would be added to costs, beyond those of other comparable public education systems, that the school system would have to absorb. Like some other cities, Detroit’s schools had become something of a competitive free-for-all, with a bevy of charter schools competing with traditional schools for students, and even engaging in aggressive advertising to skim off the cream from those institutions.

Neither Rip Rapson, president and CEO of The Kresge Foundation, nor Laura Trudeau, managing director at Kresge (and fully immersed in the follow-up to the grand bargain), minimize the importance of a DPS solution for Detroit’s future—but they recognize that not every foundation can be at the helm of every possible solution. Kresge’s emphasis, explained Trudeau, is to work on early childhood education issues—deferring to the Skillman Foundation to take the lead on education issues, added Rapson, with Kresge (and presumably others) prepared to “backfill” where Skillman leads.

If Detroit is to revive and, as part of that process, repopulate, it means creating or reviving a school system that can serve existing and future residents with children, as opposed to watching families leave the city when the challenge of schooling nears. In the aftermath of the grand bargain, two competing visions for the schools have emerged—neither one a panacea, and both with complexities and variations that will make the resolution difficult.

The Skillman Foundation was a prime mover behind the Coalition for the Future of Detroit Schoolchildren, whose thirty-page report was not short on controversy as the body deliberated, with the foundation’s CEO Allen serving as one of the Coalition’s five cochairs.23 The Coalition’s report describes a school system in governance chaos—a mix of traditional public schools, charter schools (rubber-stamped by as many as a dozen or so authorizers ranging from the city and the state to Grand Valley State University, Central Michigan University, and even Northern Michigan University—the latter some four hundred miles from Detroit), and twelve of the city’s worst-performing schools, administered by the state through the Education Achievement Authority (EAA). The Coalition recognized that “[w]hen so many are in charge, there is no accountability” (emphasis in the original).24

To recover from this “Wild West” system of school accountability, as the Coalition described it, the report called for an end to emergency management of the public schools and for a transition of the education system back to local control, with an elected school board. The Coalition calls for returning the oversight of the EAA schools back to the city, as well, and putting the charter schools under a regimen that establishes quality controls where little or none currently exist and limits the ability of authorizers to set up charter schools willy-nilly.

Following the Coalition report, Michigan Governor Rick Snyder announced his own plan for Detroit schools, with some elements that adhere to the Coalition recommendations—notably, an elected school board, but overseeing a new school district, the Detroit Community Schools, in charge of all elements and assets of public education but for the debt, which would remain with the old Detroit Public Schools.25 That debt would presumably have to be addressed by the state, so essentially this was asking state legislators in Lansing to vote to help the city that many have long seen as a financial albatross. How the new school district would function to bypass future indebtedness and to deal with the costs of educating a low-income, deprived student body isn’t clear. But, presumably, this structure would allow school fundraisers to address the problems they face in getting public and private support for the schools without having to encounter the cold shoulder they often get when the acronym “DPS” enters the discussion.

“If we can’t fix education, our recovery will be incomplete and short-lived,” the Skillman Foundation’s Allen said. She pointed out that the charter schools, for example, operate independently of the Detroit Public Schools—some presenting and marketing themselves as autonomous. She noted, however, that the current debates are first and foremost governance ones, with approaches to improving and guaranteeing the quality of education for Detroit school pupils not yet taking center stage in the restructuring of the city’s public education. Governance may have to be that necessary first step, because at this point there is no systemwide accountability for educational performance. With some public schools, notably charters, which are in theory parts of public school systems, “we are allowing people with public dollars to act in a private manner and…not for the public good,” Allen said.

Amid the tours of education reformers who have vaulted charter schools in Detroit into a virtual tie with traditional public schools vis-à-vis the number of pupils they have captured, Allen is raising a different issue—one of returning oversight to the people of Detroit who have long been disenfranchised by the school system and by the city government overall. The Coalition report, perhaps reflecting a Skillman Foundation value, proposes to hold all school types and all school management structures to the same standards of financial transparency—something typically resisted by freewheeling charter schools attempting to function as publicly subsidized private schools.

The grand bargain, whatever its strong points and shortcomings, has returned Detroit to a discussion of something that it gave up on long ago: the recognition that the residents of the city are just as capable of self-governance as anyone else. If Detroit is really going to emerge from bankruptcy, it is a bankruptcy of the public fisc and the public trust that must be overcome.

Restoring Democratic Functions

Why such attention to the role of foundations in “saving” Detroit from the depths of a debilitating bankruptcy? Steve Tobocman, former Michigan state representative and current executive director of Global Detroit, indicated that local government’s track record in tackling difficult problems hasn’t quite matched the quality of the philanthropic sector’s. No one in Detroit philanthropy is of the mind that they have had an unblemished track record themselves, but the devolution of Detroit’s governing structures has been a widely recognized issue.

Tobocman indicates that, having reached its nadir with the administration of now-jailed former mayor Kilpatrick, the problem of Detroit’s governance crisis was one of ethics. Who could be entrusted to function professionally, reliably, and ethically in confronting Detroit’s mammoth economic and neighborhood problems? In Tobocman’s opinion, what Detroit needs to do—and in some respects already is doing—as it backs up from collapse, is to rebuild “a new civic infrastructure” at the neighborhood level. He indicated that one step toward that end has been the change in structure of the city council, from at-large to district elections. As that change takes hold in the consciousness of Detroiters, residents will over time begin turning to district council members to press the city to function—and hold the council members accountable when it does not.26

For his part, Mayor Michael Duggan has begun restructuring municipal services to match the district outlines. Coterminous service and governance districts can potentially reenergize Detroiters to take responsibility for a municipal government that has spun centripetally away from their influence. Duggan’s approach is, according to some observers, meant to reconnect neighborhoods with services and local government with nonprofits. The Coalition’s school board recommendations are fundamentally proposals for restoring local control in education—wresting it from the state, from freewheeling charters, and from independent authorizers located across the state. Eventually, with respect to both city hall and the schools, the trajectory of recovery has to involve a revival of local self-governance, else Detroit remain as it has been in its history: a city dominated by corporate interests and their political partners—albeit with a new set of corporate power brokers replacing the automobile-manufacturing elites of the past.

Part of that picture has to be a revival of the nonprofit sector, particularly as r